Wednesday, June 29, 2011

The Will-of-the-Voters Budget

Notwithstanding any other provision of law or of this Constitution, the budget bill and other bills providing for appropriations related to the budget bill may be passed in each house by rollcall vote entered in the journal, a majority of the membership concurring, to take effect immediately upon being signed by the Governor or upon a date specified in the legislation.
This language seems pretty straightforward to me. It's part of our State Constitution, Proposition 25 approved by 55.1% of the voters on November 2, 2010, the same day they elected Jerry Brown Governor and elected a Democratic majority in each house of the State Legislature.

On June 28, 2011, that Legislative majority approved a budget containing major spending cuts in all program areas, sending it to Brown who said he's on board with the budget bill.

But also it's a budget predicated on significant revenue growth. In the first seven months of the current fiscal year, 2010-11, the total of Corporate, Personal Income, and Sales Taxes exceeded 2009-10 by 12.16%. Based on that surprising news, every budget proposal discussion since February has assumed continuation of the growth.

The problem is February through May the 2010-11 total was the same as 2009-10. If February - May is indicative of a trend, the adopted budget will be $10-$12 billion short on revenue without even considering the gimmicks that may not work because they are illegal.

This may be the worst California General Fund Budget ever adopted. But it is truly the Will-of-the-Voters Budget.

The voters did not give the ability to raise taxes to a majority of each house of the Legislature, assuring that taxes would not be raised. The voters did not elect a majority in each house of the Legislature that would completely eviscerate funding for schools, caring for children, caring for the aged and the infirm, law enforcement, courts, fire protection, emergency medical services, libraries, etc. But the voters did set in place a system that would result in major funding cuts for all those government services during bad economic times.

With complete foreknowledge, the electorate put in place a system that could only produce this Will-of-the-Voters Budget. And the list of knowledgeable people who supported establishing this system is an impressive list of wise and politically savvy folks - just ask them.

So imagine my surprise when I read on the San Francisco Chronicle website who angrily came out swinging in reaction to the Will-of-the-Voters Budget:
The president of the California Statewide Law Enforcement Association -- who happens to work as a DOJ special agent -- also had some choice words for the governor and Democratic legislators. Alan Barcelona accused Democrats of welcoming drug gangs to California and called the budget cut "absolutely astounding."
Gee,the California Statewide Law Enforcement Association is on the list of wise and politically savvy folks who supported Proposition 25.

Department of Justice (DOJ) funding is a good example of "where the rubber meets the road" in State Government, so let me take some time here to review the truth for Mr. Barcelona and others.

The DOJ employs a lot of those expensive state employees we hear about from the anti-tax forces. For the past four years, now-Governor Jerry Brown was Attorney General (AG), the head of the DOJ. Here's how the functions of the DOJ were described in former-AG-now-Governor Brown's January 10, 2011 Budget:
The DOJ represents the people in all matters before the Appellate and Supreme Courts of California and the United States; serves as legal counsel to state officers, boards, commissions, and departments; represents the people in actions to protect the environment and to enforce consumer, antitrust, and civil rights laws; and assists district attorneys in the administration of justice.

The DOJ also coordinates efforts to address the statewide narcotic enforcement problem; assists local law enforcement in the investigation and analysis of crimes; provides person and property identification and information services to criminal justice agencies; supports the telecommunications and data processing needs of the California criminal justice community; and pursues projects designed to protect the people of California from fraudulent, unfair, and illegal activities. The DOJ receives funding support from the General Fund, as well as federal funds and a number of special‑purpose funds related to the Department’s regulatory and legal enforcement activities.
In Brown's January proposed budget, on Appendix Page 19 what one can learn is that the $0.6 billion projected 2010-11 expenditures in the DOJ increased 9% over 2009-10, even though federal funding dropped $4.5 million and General Fund support dropped $25 million.

What one can also learn is that in Brown's January 2011-12 budget proposal, DOJ spending was still 5% higher than 2009-10. This was true even though federal funding was projected to be slightly lower than 2009-10 and General Fund support was to be cut another $37 million (making the General Fund support reduction $62 million from 2009-10 levels).

So the Chronicle story tells us the folks at the DOJ, including newly elected Attorney General Kamala Harris, are upset about the adopted June 28 budget:
Harris' Department of Justice would see a $35.8 million reduction in its law enforcement budget next fiscal year, and another $35.2 million in the year after that. That $71 million cut could cost the DOJ another $40 million in matching federal funds over the next two years, said Division of Law Enforcement Director Larry Wallace.

"We could be looking at cuts in excess of $100 million," he said. "It's unprecedented, unsafe and unsustainable to the Department of Justice and it will greatly handcuff California law enforcement. We could lose up to 600 law enforcement positions if we take this hit, and possibly have to eliminate the bureau of narcotic enforcement and the bureau of investigations and intelligence."

Since these cuts were more or less included in the Governor's January 2011 budget which assumed an extension of temporary taxes, all this looks like political spin aimed at the anti-tax Republican base which is typically pro-law-enforcement.

On the other hand, it does appear from the quote noted above that California Statewide Law Enforcement Association President and DOJ employee Alan Barcelona "didn't get the memo" and appears genuinely angry at Democrats in the Legislature. Maybe Barcelona was surprised when Wallace, his boss, pointed out that the Will-of-the-Voters Budget eliminates jobs in the DOJ.

Unfortunately for Mr. Barcelona, Californian's aren't enamored with what they perceive as "the bureau of narcotic enforcement."  For the majority of Californian's the most visible squandering of law enforcement time and money is the marijuana eradication program. In fact, polls indicate that the majority of Americans, including many thinking conservatives, have second thoughts about the whole War on Drugs thing.

So when Californians expect every department in State Government to reduce spending because of The Great California Slump, given the choice of activities in the DOJ...
  • prosecuting violations of consumer, antitrust, civil rights and environmental laws;
  • providing persons and property identification, communications, data processing, lab and other services for the criminal justice community; and
  • coordinating drug enforcement such as marijuana eradication;
...guess which activity many folks might think is the least important.

In the years immediately following the passage of Proposition 13 in 1978, then Governor Jerry Brown working with then Assembly Speaker Willie Brown started gaming the system. It has taken over 30 years, but it's over. Like many leaders in California's public employee labor organizations, Mr. Barcelona does not understand that we are nearing the end of the gaming of the governmental finance system.

When Californian's in 1978 decided to move away from the one stable governmental revenue source - the property tax - and shift to the volatile income and sales taxes, they presumably expected government to adapt. That means eliminating functions in hard times.

Governor Brown's May 2011 budget revision devotes 13 pages to such function eliminations most of which, I assume, have been incorporated into the final budget.

Interestingly in that May revision there is one reference to the DOJ:
DNA Identification Fund Shortfall - The May Revision proposes to transfer $10 million General Fund to the DNA Identification Fund, and restore $4.1 million Genera l Fund to the DOJ for lease revenue payments on regional forensic laboratories. Revenues to the DNA Identification Fund have not come in as projected; therefore, these changes are necessary in order to ensure the DNA and regional forensic laboratories are able to continue performing critical public safety work
In other words, "when push came to shove" Brown restored funding to a DOJ program that makes sense, seems necessary, and would have general public support.

That's how the process established by Proposition 25 is going to work. You don't furlough employees to save money like the Gubernator did. You particularly don't furlough employees at the DMV whose Department receives no tax money and is experiencing no reduction in fee revenue. You lay off employees working in tax supported functions based on how important you think those functions are to the people of California. And if you can't do those functions adequately, you stop doing them.

Now, of course, comes the part people will only begin to understand today. Late last night, the Senate approved Assembly Bill 114, the last of the budget followup bills needed to make the budget work. A key element in this bill "slides" $5.6 billion of tax revenue out of the State General Fund and into county revenue to support transferring prison inmates to county jails. It sounds reasonable. But the tax revenue no longer counts as State General Fund tax revenue which means it no longer is subject to Prop 98 that would require 40% of it on K-14 education.

Of course, in order avoid being lynched by one of their key constituencies, the teachers' unions, Democratic Legislators included a provision that suspends school district powers to issue teacher layoffs between now and August and requires districts to ignore the possibility of mid-year cuts for revenue projection purposes. Plus approved budget provisions requires that districts deal with a potential mid-year budget cut by slashing school days and laying off bus drivers rather than teachers.

The problem, of course, is that the budget cuts related to slashing school days and laying off bus drivers are the ones called "trigger cuts" and the bill require districts to bargain any further reductions in the school year with unions that represent teachers and non-classroom staff.

The "trigger cuts" relate to only $4 billion of the $11 billion in tax revenue growth over 2009-10 actual included in the budget. Here's how it works:
  • If $1 billion or more of that growth fails to materialize, no cuts are needed and any shortfall will be dealt with in future years' budgets.
  • If more than $1 billion but less than $2 billion of that growth fails to materialize, a list of $600 million in cuts will maybe occur and the rest of the shortfall will be dealt with in future years' budget.
  • If more than $2 billion of that growth fails to materialize, $1.9 billion in cuts may be imposed including the ones on the schools and the rest of the shortfall will be dealt with in future years' budget.
  • If not only the $4 billion, but some or all of the remaining $7 billion fails to materialize as is possible no solution is offered because that just can't happen - right?

According to the Sacramento Bee:
Gov. Jerry Brown and Democratic leaders have pledged to pursue a 2012 ballot measure that puts this "realignment" plan in the constitution, giving counties sufficient assurances that they will continue receiving money for providing services in lieu of the state. Based on AB 114, that measure also will include tax increases to pay for realignment in future years, just as Brown's original budget sought to do.

AB 114 says that if the voters reject this measure -- or if it never reaches the ballot -- the state must determine in November 2012 how much it would have owed schools for 2011-12 had the $5.6 billion never gone to local governments. Right now, that amount stands at about $2.1 billion. The money would be repaid over five years with 20 percent of it dedicated to paying off deferrals, mandates and other onetime purposes.

If the ballot measure fails, the bill seems to ensure that schools are essentially held harmless by the tax shift -- and that their base will effectively be $2 billion higher this year and in future years than Brown's original January budget proposed.

If the measure passes, schools will not get repaid that $2 billion, but they stand to get more money from voter-approved taxes in future years.
At this point, this is so convoluted I hope the language in the various bills as adopted makes some sense.

As I said before, this may be the worst California General Fund Budget ever adopted. But it is the Will-of-the-Voters Budget.

No comments: